BlackRock has announced the launch of the iShares MSCI World Small Cap UCITS ETF (WSML LN) on the London Stock Exchange. The new ETF provides exposure to small-cap companies in developed markets worldwide.
The iShares MSCI World Small Cap UCITS ETF offers globally diversified exposure to small-cap companies.
While investors can expect higher risk and the prospect of higher returns compared to global large-cap equity ETFs, the fund has the potential to play a strategic or tactical role within portfolios.
David Moroney, head of iShares EMEA product at BlackRock, explains, “Global equities account for approximately $70 trillion in assets, with almost 12% covered by the developed small-cap segment. Investors are increasingly diversifying their global equity allocation to include small-cap stocks, and they are using ETFs as a tool to do this in a cost-efficient manner.”
Moroney also puts forward a bullish case for smaller company investments given the current macroeconomic environment. He says, “Acceleration in economic growth will benefit small-cap stocks, as these companies tend to add to employment quicker and contribute to growth faster. At the same time, through their domestic focus, smaller companies tend to benefit from domestic growth policies and will be less impacted by future changes in global trade arrangements.”
The fund tracks the MSCI World Small Cap Index, which currently comprises over 4,000 small-cap stocks across 23 developed market countries. The index covers approximately 14% of the free float-adjusted market capitalisation of each country.
The index currently has over half its weight in the US (54.1%), which is broadly in line with global all-cap country distributions. Japan is next in line with a 13.1% weighting, followed by the UK (7.6%), Canada (3.7%) and Australia (2.8%).
The top five sectors collectively account for roughly 70% of the index, with industrials (17.5%), financials (14.0%), information technology (14.0%), consumer discretionary (13.9%) and health care (10.6%) all showing significant allocations. There is very little idiosyncratic (stock-specific) risk in the index with the largest constituent representing just 0.2% of the index.
The ETF has a total expense ratio (TER) of 0.35% and offered in both USD (WMSL) and GBP (WLDS) trading currency share classes.
The ETF comes in 10 basis points cheaper than the rival SPDR MSCI World Small Cap UCITS ETF (WOSC_LN) which has a TER of 0.45%. This ETF was launched in November 2013, tracks the same index and currently has around $300 million in assets under management.